Will Pronatalist Policy Work? The Case of South Korea

The total fertility rate in South Korea has consistently declined from its 2.1 replacement level in 1983 to its current level of 1.23 in 2012. From 2005 to 2010, the government implemented its first pronatalist set of policies to encourage people to have more children. Currently, fertility grants are provided at a provincial level, widely varying in their amounts and qualifications. These pronatalist policies have been found ineffective. This paper examines the desired family size of the university student population in South Korea and their responsiveness to cash transfers. By hypothetically assuming two different levels of cash transfers, I evaluate the elasticity of desired family size along the intensive margin by using the survey data designed as a part of this paper. This paper finds positive effects of the cash transfers on desired family size and a positive correlation between the amounts of the cash transfers and desired family size. Furthermore, desired family size of the middle income group is particularly elastic to the income shock the cash transfers generate.